Theories of Term Structure of Interest Rates (FRM Exam Part 1, Book 3, Financial Markets & Products)
In this video from FRM Exam Part I curriculum, we take a look at various theories of term structure of interest rates, specifically Expectations Theory, Market Segmentation Theory and Liquidity Premium / Preference Theory. These theories help us explain why term structures demonstrate their usual behavior (upward sloping, short term and long term rates usually moving in the same direction etc.).